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How Much Should We Spend on Government

The Denver Post reported that House Speaker Russ George, R-Rifle, acknowledges that the TABOR amendment has hampered the Legislature#39;s ability to adjust fiscal policy to keep pace with the economy and has slowed the Legislature#39;s ability to cut taxes.[1]nbsp; This is a curious statement.nbsp; TABOR imposed limits on state expenditure growth and required that tax increases be put to a popular vote.nbsp; Apparently adjusting fiscal policy to keep pace with the economy means nothing more than growing government by grabbing ever increasing amounts from taxpayer wallets.nbsp;nbsp;

According to the Denver Rocky Mountain News, current proposals would allocate $3.59 billion in state money to schools next year.nbsp; This does not include local property taxes.nbsp; Roughly speaking, that would be enough to give every child in the state under 18 a check for $3,400, an amount that equals or exceeds many private school tuitions.nbsp; It is not enough for Representative Norma Anderson, R-Lakewood.nbsp; She wants millions more to ensure that the state pays $4,014 during fiscal year 2000-01.[2]

Representative Jennifer Veiga, D-Denver, wants more, too.nbsp; She#39;s afraid that the state will be unable to do necessary construction and maintenance because its capital development fund will be inadequately funded.nbsp; What#39;s really insane, she says, is that we#39;re talking about cutting taxes and we#39;re probably going to have to finance prisons because we won#39;t have the capital to build them.[3]nbsp; With state revenues in better shape than they have been in years, Ms. Veiga claims that the state cannot find the money to fix the roof.nbsp; Why, taxpayers might reasonably ask, is the state#39;s capital in such dodgy shapenbsp; Has maintenance not ranked high on the priority listnbsp; If not, should elected officials be rewarded for mismanagement with a budget increasenbsp;

Each of these officials thinks that government needs more tax revenue because government lacks the money to do everything that he or she wants it to do.nbsp; What they refuse to own up to, and what taxpayers have a duty to make them see, is that scarcity is part and parcel of the human condition.nbsp; There are always more needs than there are resources.nbsp; Letting government officials prattle on endlessly about needs is like letting a self-involved teenager tell you how much allowance he needs to finance his desired lifestyle.

Rather than talking about government needs, one should ask how much it is reasonable for government to take.nbsp; On last week#39;s Mike Rosen show, Congressman Mark Udall, D-Colorado, said that he thinks that it is about right that the federal government takes as much as 40 cents out of every additional dollar that taxpayers earn.[4] He favors only targeted tax cuts, meaning the special breaks for favored population groups that inevitably increase tax code complexity.nbsp; Given that many religions offer eternal salvation for only 10%, this seems rather high.nbsp;

It seems high because it is.nbsp; According to the Tax Foundation, in 1999 Americans spent more per capita on government ($10,298) than on any other item.nbsp; Government cost more than housing and household operations ($5,833), health and medical care ($3,829), food ($2,693), transportation ($2,568), recreation ($1,922), or clothing ($1,404).[5]

In 1900, governments at all levels collected about 7 percent of GDP.[6]nbsp; From 1931 to 1970, the percentage rose sharply, reaching 29 percent by 1970.nbsp; Since then, it has fluctuated around 30% and was 31 percent in 1997.nbsp; Although the percentage has been roughly constant, the growth in GDP means that the same percentage of GDP can buy much more.nbsp; Adjusted for inflation, 30 percent of GDP in 1997 bought about 2.3 times as much as 30 percent of GDP in 1967.[7]nbsp;

Even assuming that government has not, like the rest of the economy, managed to lower the cost of the services or products that it produces, this means that we are buying more than twice as much government as we did 30 years ago.nbsp;

Political systems operate under different rules than market ones.nbsp; Subjecting more activities to their control generally makes production more politicized and less efficient.nbsp; The consumer is serf, not king, with the result that more spending on politically determined goals often makes people worse off.nbsp; Alleviating poverty is one of the most commonly used justifications for government spending.nbsp; Adjusted for inflation, welfare spending including cash, medical, food, housing, and energy aid, was $1,292 for each person in the lowest quarter of the income distribution in 1967.nbsp; By 1993 it was $5,023 per person.[8]nbsp; Still, the official poverty rate rose from 12.6 percent in 1970 to 13.3 percent in 1997.[9]nbsp; Adjusted for inflation, public elementary and secondary schools spent $3,710 a student in 1970-1.nbsp; By 1995-6 they were spending $6,501, with dismal results.[10]nbsp;nbsp;nbsp;

Thus the iron law of government:nbsp; If you send it, they will spend it, though not necessarily on anything that does anyone any good.nbsp;

[1] Julia C. Martinez.nbsp; 3 March 2000.nbsp; Seniors#39; property taxes, TABOR under scrutiny, Denver Post, p. 12A.

[2] John Sanko.nbsp; 3 March 2000.nbsp; More school funding sought, Denver Rocky Mountain News, p. 16A.nbsp; See Fiscal Note, HB 1159 on the Colorado General Assembly web site as of 5 March 2000 for the $4,014 figure.

[3] Lynn Bartels and John Sanko.nbsp; 1 March 2000.nbsp; Dems share GOP tax concern, The Denver Rocky Mountain News, p. 18A.

[4] The Mike Rosen show, KOA Radio, 28 February 2000.

[5] The #39;Price of Civilized Society#39; Surges to $10,298 Per Person in the U.S.nbsp; Washington, D.C. The Tax Foundation.nbsp; http://www.taxfoundation.org/prpcs.html as of 5 March 2000.

[6] Joel Slemrod and Jon Bakija.nbsp; 1996.nbsp; Taxing Ourselves:nbsp; A Citizen#39;s Guide to the Great Debate Over Tax Reform.nbsp; Cambridge, Massachusetts:nbsp; The MIT Press, p. 21.

[7] 1997 GDP was roughly 2.3 times 1967 GDP.nbsp; See table B-2, Economic Report of the President, 1998.

[8] Robert F. Rector and William F. Lauber.nbsp; 1995.nbsp; America#39;s Failed $5.4 Trillion War on Poverty.nbsp; Washington, D.C:nbsp; The Heritage Foundation, p. 96.nbsp;

[9] W. Michael Cox and Richard Alm.nbsp; 1999.nbsp; Myths of Rich amp; Poor: Why We#39;re Better Off Than We Think.nbsp; New York:nbsp; Basic Books, p. 14.

[10] U.S. Department of Education, National Center for Education Statistics.nbsp; http://nces.ed.gov/fastfacts/display.aspid=66 as of 5 March 2000.

Linda Gorman is a Senior Fellow with the Independence Institute, a free-market think tank in Golden, Colorado, https://i2i.org. This article originally appeared in the Colorado Daily (Boulder), for which Linda Gorman is a regular columnist.

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